Tumor promoters stimulate the selective expansion of initiated mouse keratinocytes in the two-stage model of skin carcinogenesis. However, it is not clear whether these promoters directly modulate the growth of initiated cells or rather permit clonal expansion of initiated cells by modifying the environment of adjacent normal cells. The goal of this study was to further understand the mechanism of action of tumor promotion during early neoplastic progression of human stratified epithelium. To accomplish this, we have established an organotypic culture model that mimics a preneoplastic tissue and contains mixtures of genetically marked (beta-galactosidase), low-grade malignant keratinocytes (HaCaT-ras II-4) and normal human keratinocytes (NHKs) to monitor the fate and phenotype of these cells after treatment with 12-O-tetradecanoylphorbol-13-acetate (TPA). In submerged culture, concentrations of 0.001-1 microg/ml TPA were shown to limit the growth of NHKs yet had no effect on growth of II-4 cells. TPA (0.001 microg/ml) was then added to organotypic cultures containing mixtures of NHK:II-4 cells at varying ratios to determine whether this agent could selectively stimulate clonal expansion of II-4 cells in a normal epidermal background. Immunofluorescence for beta-galactosidase demonstrated that TPA caused a significant increase in the percentage of beta-galactosidase-positive areas in 12:1 and 4:1 mixtures. This TPA-induced expansion of II-4 cells was associated with a marked decrease in proliferation of NHKs, suggesting that II-4 could selectively expand because of its growth advantage relative to NHKs. Clonal expansion of tumor cells was temporally linked to the decreased expression of filaggrin and keratin 1 expression in adjacent NHKs. These findings indicate that TPA may enable expansion of potentially malignant cells through the epigenetic modification of proliferation in NHKs and differentiation of NHK and II-4 cells.